Latest from GIFC

Saturday, 2 April 2016

KUALA LUMPUR: RAM Rating Services expects growth in the Malaysian insurance and takaful sectors to moderate in 2016 amid the challenging landscape and uncertainties in the financial markets.

The ratings agency said on Thursday against its GDP forecast of 4.4% for 2016, gross premiums were projected to expand about 5% for life insurance, 2%-3% for general insurance and 4%-5% for takaful contributions.

“Despite the likelihood of slower momentum in the near term, the industry’s mid to long-term outlook remains favourable given the low insurance penetration rate, rising consumer awareness and greater efforts in product innovation and distribution,” it said.

RAM Ratings said insurers and takaful operators’ capitalisation levels and reserves remained robust and the industry is supported by a sound and prudent regulatory framework.

“Against this backdrop, we have maintained a stable outlook on the credit profiles of our rated insurers and takaful operators.

“Over the next few years, the operating landscape will evolve with regulatory-driven liberalisation. The detariffication of motor and fire insurance – to be implemented in phases beginning this year – bodes well for the sector as premiums will gradually commensurate with underwriting,” it said.

RAM Ratings said the life and family takaful sectors would see greater operational flexibility as initiatives under the Life Insurance and Family Takaful Framework were gradually implemented.

It pointed out these reforms might result in some short-term uncertainty for insurers and takaful operators during the initial adjustment period but they would be positive for the long-term growth and efficiency of the industry.

In 2015, insurers and takaful operators were not spared the fallout from slower economic growth and subdued consumer sentiment.

To recap, gross premiums in the general insurance segment rose only 1.7% (2014: 6.5%) on-year to RM15bil. Life insurance premiums grew 5.4% (2014: 7.7%) to RM37.4bil.

Although family takaful continued to expand at 8.0% (2014: 4.4%), growth in the general takaful segment eased to 6.0% (2014: 13.3%), ending the year with RM7.0bil and RM2.3bil of gross contributions, respectively.

Overall, the sector’s profit ebbed 13.8% as benefits and claims as well as commissions and management expenses outpaced the increase in premiums/contributions and investment returns fell amid a volatile market.